Project Directions - Grand River Equipment Rentals
On December 1, Steve and Kim Jones formed a corporation called Grand River Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and taking over the location of Rent-it, an equipment rental company that was going out of business. The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December, the corporation entered into the following transactions:
Dec.1 Issued to Steve and Kim Jones 20,000 shares of capital stock in exchange for total of $200,000 cash.
Dec.1 Purchased for $240,000 all of the equipment formerly owned by Rent-It. Paid $140,000 cash and issued a four-year note payable for $100,000.
Dec.1 Paid $12,000 to Shapiro Realty as three months' advance rent on the rental yard and office formerly occupied by Rent-It.
Dec. 4 Purchased office supplies on account from Modern Office Co., $1,000. Payment is due in 30 days. These supplies are expected to last for several months.
Dec 8 Received $8,000 cash as advance payment on equipment rental from McNamer Construction Company. This advance payment will be earned over the course of several months.
Dec 12 Paid salaries for the first bi-weekly two week payroll in December, $5,200.
Dec 15 Excluding the McNamer advance, equipment rental revenue earned during the first 15 days of December amounted to $18,000. $12,000 was received in cash, and the remainder will be billed to customers.
Dec 17 Purchased on account from Earth Movers, Inc., $600 in parts needed to repair a rental tractor. Payment is due in 10 days.
Dec 23 Collected $2,000 of the accounts receivable related to the December 15 equipment rentals.
Dec 24 Rented a backhoe to Mission Landscaping at a price of $250 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.
Dec 26 Paid biweekly salaries, $5,200.
Dec 27 Paid the account payable to Earth Movers, Inc., $600.
Dec 28 Declared a dividend of 10 cents per share to be paid in January. (This is a new entry with a DEBIT to "Dividends" and a CREDIT to "Dividends Payable".)
Dec 29Grand River Equipment Rentals was named in a lawsuit, along with Mission Landscaping and Collier Construction, as a co-defendant in a $25,000 suit filed on behalf of Kevin Davenport of Mission Construction. After working on Dec 26, Davenport climbed the fence to play on parked construction equipment. While playing on a backhoe, he fell and broke his arm. The extent of the company's legal and financial responsibility for this accident, if any, cannot be determined at this time.
Dec 29 Purchased a 12-month public-liability insurance policy for $9,600.
Dec 30 Earned equipment rental revenue during the 2nd half of December of $20,000. $15,600 was received in cash, and the remainder will be billed to customers.
Dec 31Received a $700 bill from the City for December utilities.
Data for Adjusting Entries:
a) The advance payment of rent on December 1 covered a period of three months.
b) The annual interest rate on the note payable to Rent-It is 6%.
c) The rental equipment is being depreciated by the straight-line method over a period of 8 years with no salvage value.
d) Office supplies on hand at December 31 are $600.
e) During December, the company earned $3,700 of the rental fees paid in advance by McNamer Construction Co. on December 8.
f) As of December 31, six days'rent on the backhoe rented to Mission Landscaping on December 24 has been earned.
g) Salaries earned by employees since the last payroll date are $1,400 and will be paid in January.
h) It is estimated that the company is subject to a combined federal and state income tax rate of 40 percent of income before income taxes (total revenue minus all expenses other than income taxes). These taxes will be paid next year.
Required: Perform the Accounting Cycle
General Journal including (1) regular transaction journal entries for the month of December, (2) end of the month adjusting journal entries, and (3) end of the month closing entries
General Ledger t-accounts for all accounts including all transactions and entries for the entire month of December including the effects of regular transaction journal entries, adjusting entries and closing entries
Trial Balance reports at different stages in the accounting cycle including (1) an Unadjusted Trial Balance, (2) an Adjusted Trial Balance and a (3) Post-Closing Trial Balance
Financial Statements including (1) Income Statement, (2) Statement of Retained Earnings and (3) Balance Sheet
Comment on your analysis of this business and its first month of operations.
Check Numbers:
It is recommended that you work in stages stopping and checking your totals before moving on to the next stage.
Unadjusted Trial Balance $349,700
Adjusted Trial Balance $364,680
Post-Closing Trial Balance $333,100
Attachment:- Template.rar